Posts Categorized: Lost in the Fine Print

Today Senator Patrick Leahy of Vermont continued the fight against the pernicious practice of forced arbitration, introducing the Restoring Statutory Rights Act of 2016. The bill would ensure that big corporations can’t use insidious forced arbitration clauses to avoid liability for violating statutory and constitutional rights. If passed, the bill would be a victory not just for the individuals and small businesses who need access to fair courts to vindicate fundamental legal rights, but for democracy itself.

Below, read the full letter that AFJ sent to the Senate urging support for the bill. Read more

Earlier this week, the Department of Defense announced it will be expanding the Military Lending Act to cap interest rates and prohibit forced arbitration in credit cards, payday loans, vehicle title loans, refund anticipation loans, and other types of loans made to service members. A previous rule had been riddled with loopholes that allowed lenders to charge exorbitant fees and avoid the arbitration ban. The expansion is an important step toward protecting troops who are often targeted by predatory lenders before being deployed.

The news comes as the Consumer Financial Protection Bureau (CFPB) moves toward rulemaking of its own on forced arbitration. On Wednesday of last week, CFPB Director Richard Cordray confirmed the agency would soon be announcing a rule on the use of forced arbitration in financial products for all American consumers.

The decision follows two studies conducted by the agency that demonstrated the prevalence of forced arbitration and the harm it causes. Tens of millions of consumers use products under the CFPB’s jurisdiction that contain forced arbitration clauses. For some products, including payday loans and cell phones, nearly every contract signed by a consumer has an arbitration clause in it. Yet most consumers mistakenly believed they could still sue their employer in court or join others in such a suit. Once in arbitration, the report found that businesses won 93 percent of their claims and counterclaims.

Industry groups and congressional Republicans have already begun to fight back. An amendment to the Financial Services Appropriations Bill would require the CFPB to conduct yet another, duplicative study—at taxpayer expense—before beginning the rulemaking process. And in a transparent attempt to create further delay, the American Bankers Association, the Consumer Bankers Association, and The Financial Services Roundtable made similar demands in a recent letter to the CFPB.

Yet these efforts have not been enough to stall our momentum. The CFPB has confirmed its intention to initiate the rulemaking process despite industry objections, and for now the financial services bill has stalled on the House floor. More than three years after the CFPB began work on its arbitration study, meaningful change is finally on its way.

This month marks the five year anniversary of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which gives the CFPB its authority to ban forced arbitration clauses in the financial industry, and the four year anniversary of the CFPB itself. On these important birthdays, recent efforts to curtail forced arbitration provide reason to celebrate—but there is more work to be done. Industry opposition will continue. The rulemaking process, once underway, will be contentious. And AFJ will be there fighting every step of the way.

AFJ Justice Programs Director Michelle Schwartz testifies today at a public hearing in Newark, N.J. on forced arbitration. The hearing was called by the Consumer Financial Protection Bureau. CFPB released a study of forced arbitration today – and CFPB has the power to prohibit the practice. This is Schwartz’s testimony:

My name is Michelle Schwartz, and I am Director of Justice Programs at Alliance for Justice. I was born and raised in nearby Livingston, and I was Senator Lautenberg’s Deputy Chief of Staff, so I’m very happy to be with you here in Newark.

On behalf of Alliance for Justice’s more than 100 member organizations working for a fair and just society, thank you for conducting this comprehensive study of forced arbitration. The study confirms what we have long suspected—forced arbitration allows companies to evade accountability when they wrong consumers.

Alliance for Justice recently released a short documentary, Lost in the Fine Print, that demonstrates the harm forced arbitration causes for everyday Americans.

It tells the story of Debbie Brenner, who was cheated by a for-profit college that took her student loan money, but failed to live up to its promises of quality instruction and job placement. When Debbie and her fellow students tried to sue, they were forced into arbitration because of a clause in their enrollment form they never read and certainly didn’t understand. In fact, a recruiter for the college admitted even he didn’t understand what the clause meant. But that didn’t stop an arbitrator from deciding the case against the students—and ordering them to pay hundreds of thousands of dollars for the school’s legal fees.

Lost in the Fine Print also tells the story of Nicole Mitchell of West New York. Although Nicole’s case dealt with employment discrimination, her experience was instructive for all who face forced arbitration. The arbitration was conducted in secret, Nicole never even got to meet the arbitrator who decided her fate, and she can never appeal.

Debbie and Nicole were unusual in that they ever even went to an arbitrator. As your study shows, the vast majority of wronged consumers never make it that far. Often, that’s because the amount they could possibly recover for the real harm they’ve suffered pales in comparison to the cost of bringing an individual arbitration.

That was true for Alan Carlson, whose story we also tell in our film. Yet the Supreme Court upheld American Express’s forced arbitration clause when Alan tried to sue over unfair credit card fees. The Court did so even while acknowledging that nobody in their right mind would actually bring an individual arbitration over the loss Alan suffered—essentially immunizing companies like American Express.

I’ve shown our documentary everywhere from national conferences to law school classrooms to tenant association meetings. Every time, I get two reactions: First, people can’t believe they didn’t know about forced arbitration. And second, they want to do something about it.

This study will go a long way to educating more people about this pernicious practice. But even more importantly, you have the power and obligation to actually do something about it by prohibiting forced arbitration for all consumer financial products. On behalf of all our members, we urge you to do just that without delay.

As part of Alliance for Justice’s ongoing campaign to end forced arbitration in consumer and employment contracts, we’ve worked with a host of grassroots organizers across the country. Students, community members, academics, and attorneys have reached thousands by screening AFJ’s short documentary, Lost in the Fine Print. Long-time friend of AFJ Patti Gorman planned one such screening as part of Conversations on Social Justice Series at Seattle Central College.

We asked Gorman to talk about her experience organizing a screening of Lost in the Fine Print. Responses have been edited for space and clarity.

What interested you about the issue of forced arbitration?

I was totally unaware of it and appalled when I found out about it. How can we be forced to sign away rights that are guaranteed by law? This is a true social justice issue and another indicator of how corporations unduly influence government and our daily lives.

Had those who attended the screening heard of forced arbitration clauses before? Most had not, I believe, probably because they are young students and because many are international students.

Why did you feel students at Seattle Central College needed to see this film? Why did you take on the project of organizing a screening yourself?

The college’s student and staff population is diverse and activist. I just knew this topic would interest them … I took on the organizing because I am an organizer and it comes pretty easily and because I had wonderful support from our librarians, who sponsor these noon time programs.

In addition, I had looked over the online materials created by AFJ, which are excellent, and received lots of support from [AFJ Klagsbrun Fellow] Erik Lampmann. I was a bit nervous at one point about being knowledgeable enough. But once I read the online materials, including links to more detailed court case info, and when I knew I would have a local attorney presenting with me (arranged by Erik), I knew it would be a piece of cake, which it was.

After watching Lost in the Fine Print, how do you hope others will take action to fight forced arbitration?

We need to put pressure on our elected officials to uphold our constitutional rights; hold the Supreme Court accountable, if we can, for upholding the Constitution and not overstepping its bounds into the other branches of government; keep raising hell about this issue, through class actions, when possible; and VOTE!!! I also think that if enough people struck out and initialed the contract clauses that infringe upon their rights when signing contracts, companies would finally get the message that people aren’t going to stand for their outrageous behavior. Of course, I hope many more people will use resources such as Lost in the Fine Print to educate others.

What would you say to others thinking about screening Lost in the Fine Print on their campuses or in their communities?

The whole process from preparation to implementation was fun, intellectually stimulating and very satisfying.

How did you first get involved with Alliance for Justice? What interested you about AFJ’s approach to social change?

I first heard about it from Nan Aron, a friend and former classmate (since 6th grade!). I have always been an activist for social justice. I find AFJ’s approach to helping non-profits be better at what they do [through the Bolder Advocacy initiative]… a compelling strategy—micro to macro. And now, when I see what our Supreme Court is doing that chips away at our Constitutional rights, I believe more than ever that the courts are where we need to put our attention. AFJ works hard and smart.

The librarians of Seattle Central College have graciously uploaded video of the event to their website.

If you would like to organize a screening on your campus or in your community, please contact Erik Lampmann at [email protected] or by phone at 202.464.7388.

Retailer tries to hold customer’s money hostage to forced arbitration

By Trevor BoeckmannAFJ Dorot Fellow

As we detail in our short documentary Lost in the Fine Print, forced arbitration clauses have become omnipresent in American society. They’re used by companies to prevent consumers from having the chance to stand up for their rights in court when they’re harmed. Yet most of these clauses are buried deep in the fine print of contracts and terms of service.

KTRK-TV in Houston reports that on Black Friday, local shopper Maria Selva tried to buy a new TV at the big-box retailer. Walmart had sold out of the TV by the time Selva came to purchase it, but employees gave her a coupon, and had her pay in full.

She thought she could just pick up the TV at a later date. But after she’d already paid, she was given a notice telling her she had to register online. When she went online, she found that registering the coupon meant agreeing to forced arbitration. She refused to accept the terms, and contacted Walmart to ask for a refund.

Walmart said no.

Instead, the company told her she would have to agree to forced arbitration, receive the TV, and return the TV. Only then could she receive a refund.

It wasn’t until KTRK contacted the company that Walmart finally relented and issued a refund.

The consequences of forced arbitration can be great. In Lost in the Fine Print we document the stories of Nicole Mitchell and Debbie Brenner, victims of discrimination and fraud who were never allowed to defend their rights in court.

Walmart isn’t the only company that has tried to find creative ways to impose forced arbitration.

Take General Mills, for example. Last spring, we told you about their new arbitration policy, which purported to force consumers into arbitration if they entered a company contest, printed a General Mills coupon, or even “liked” Cheerios on Facebook.

But public pressure forced General Mills to back down. Now we’re putting the pressure on other companies. Join our campaign to end forced arbitration and protect everyday Americans.

The next time a woman is forced to choose between her job and her pregnancy, she may not even make it into court.

By Michelle D. SchwartzAFJ Director of Justice Programs

There are a number of things that are incredible about Young v. UPS, the Pregnancy Discrimination Act case set to be argued in the Supreme Court today.

It’s incredible that UPS refused to make a reasonable accommodation for driver Peggy Young after she became pregnant and her doctor advised her against lifting packages heavier than 20 pounds.

It’s incredible that UPS then forced Young to take unpaid leave for the remainder of her pregnancy, causing her to lose both her wages and her health insurance at the time she needed them most.

It’s incredible that UPS refused an accommodation for Young even as it made such accommodations for workers injured on the job, workers with disabilities falling under the Americans with Disabilities Act, and even drivers who lost their commercial driver’s licenses because of DUI convictions.

It’s incredible that, in 2014, Peggy Young was forced to choose between a healthy pregnancy and her job.

And it is incredible that Peggy Young’s case against UPS made it into court at all.

Today, more and more employees are compelled to accept forced arbitration clauses in their employment agreements, employee handbooks—even job applications. These clauses say that if a dispute should arise between the employee and the company they work for, the employee can’t take that dispute before an impartial jury or judge. Instead, they have to take their case before an arbitrator picked by the company, losing their fundamental right to go to court.

These arbitration clauses apply even in cases of employment discrimination that allegedly violate such hallowed laws as the Age Discrimination in Employment Act, the Equal Pay Act, the Civil Rights Act of 1964, and, yes, the Pregnancy Discrimination Act.

In fact, over the summer we learned that another company that’s no stranger to the Supreme Court—Hobby Lobby—has a forced arbitration clause. That clause kept an employee, Felicia Allen, out of court after she was fired for trying to take unpaid leave during her pregnancy. Hobby Lobby even tried to prevent Allen from receiving unemployment compensation. As we wrote at that time:

When Allen tried to sue Hobby Lobby for discriminating against her based on her pregnancy, she learned that Hobby Lobby had a forced arbitration clause. Allen’s lawyers refused to take her case after they learned of the forced arbitration clause and she—like so many other American consumers and employees—was left out in the cold. Hobby Lobby could take its case all the way to the Supreme Court, but its employee couldn’t even get through the courthouse doors.

Nicole Mitchell

In our short documentary Lost in the Fine Print, we tell the story of Nicole Mitchell, another woman forced into arbitration after trying to sue her employer for discriminating against her—this time based on her status as a Hurricane Hunter in the Air Force Reserve.

The Uniformed Services Employment and Reemployment Rights Act (USERRA) is a federal law that prohibits employers from firing, demoting, or failing to hire military reservists because of their reserve duty. But, as Mitchell found, USERRA and other laws protecting against employment discrimination may be worth little more than the paper they’re printed on when violations are forced into arbitration.

Employees fare far worse in arbitration than they do in the courtroom. Researchers at Cornell found that outcomes for employees forced into arbitration are “starkly inferior” to those in litigation.

And the harms of forced arbitration extend beyond the outcomes in individual cases. Because arbitration generally occurs in secret, systemic abuses are never exposed and remedied. So even on the rare occasion that an employee wins in arbitration, there is little incentive for the employer to protect employee rights moving forward.

Take the case of UPS.

In October, with Peggy Young’s case already pending before the Supreme Court, the company announced that, beginning on January 1, 2015, it would offer light duty assignments for pregnant workers. That offer comes too late for Peggy Young, but it is unlikely that it would have come at all if not for the public attention the Supreme Court case has brought. If Peggy Young had been forced into arbitration as Felicia Allen and Nicole Mitchell were, , that policy change likely never would have come.

Laws like the Pregnancy Discrimination Act vindicate critically important societal goals. Their proper interpretation should be decided in the full sunlight of the courtroom—not in a secret corporate tribunal.

Today, we stand with Peggy Young, and we hope that the Supreme Court will reverse its recent trend of hostility to working women. In the long term, though, we know that protecting Peggy Young and all who face discrimination at work will require reversing the Supreme Court’s decisions upholding forced arbitration under virtually any circumstances.

Everyone who cares about fair, discrimination-free workplaces should join us in our campaign to do just that.

Ever been ripped off by a big bank? Were you charged fees you never expected? Were you misled about the terms of a loan?

If so, you may have a tough time standing up for your rights in court. That’s because many big banks have buried forced arbitration agreements in the fine print of their customer contracts. As we explain in our short documentary, Lost in the Fine Print, if the bank has a forced arbitration clause you can’t take the bank to court. Instead, you have to go to an arbitrator effectively chosen by the bank itself.

One study found when consumers go up against businesses in arbitration, the business wins 94 percent of the time.

The Consumer Financial Protection Bureau has the power to ban forced arbitration in contracts for consumer financial products, including banking services. It is expected to issue a report on the issue next year.

But we’re not waiting. We’ve joined with other activist and consumer groups to demand that five big Wall Street banks drop their forced arbitration clauses. Want to join us? Click here to sign our petition.

If we don’t stop them, the practice of forced arbitration will only spread. And you can take that to the bank.

The photos you send via Snapchat may not really go away, but your rights disappear in a flash

By now you’ve probably heard about what’s been called “The Snappening” – the leak of at least 90,000 photos and 9,000 videos sent by users of Snapchat – users who probably thought those images would disappear after ten seconds.

Because of its “self-destruct” reputation, the app is a popular tool among youngsters for transmitting sexually explicit material. Snapchat claimsthat 50 percent of its users are between 13-17 years of age, this potentially brings “The Snappening” into child pornography territory.

That’s enough to scare any parent of a Snapchat user. But as we explain below, while Snapchat may not have done a good job of protecting its users’ security, it’s doing a great job of protecting itself. Snapchat makes your rights disappear – by using a pernicious practice known as forced arbitration.

Snapchat says the massive leak of photos and videos is not the company’s fault. They issued a statement blaming it all on third-party applications which work around the self-destruct feature:

“We can confirm that Snapchat’s servers were never breached and were not the source of these leaks. Snapchatters were victimized by their use of third-party apps to send and receive Snaps, a practice that we expressly prohibit in our Terms of Use precisely because they compromise our users’ security. We vigilantly monitor the App Store and Google Play for illegal third-party apps and have succeeded in getting many of these removed.”

In other words, if your 13-year-old didn’t pore over the terms of use before using one of those third-party apps – well, that’s her fault.

The company did not answer questions about what steps it has taken to warn its users about these third-party services aside from its Terms of Service.

Chris Eng, vice president of research at computer-security research firm Veracode, said Snapchat has “a history of not taking security seriously.” [One of the third-party apps] was in the [Google Play Store] since 2013. That alone suggests to me that they’re not being very aggressive’ about policing third-party apps, Eng said.

Similarly, in a commentary for Wired Prof. Woodrow Hartzog of the Cumberland School of Law at Samford University writes:

The guidance and rules are buried in thefine printwith no explanation for the ban on third-party software. This dense, boilerplate agreement places the burden of securing against this attack on the party in the relationship least likely to have knowledge of the vulnerability—the user. People who relied upon the app’s implicit promise of ephemera and relative safety wouldn’t be wrong to feel betrayed by Snapchat’s “it’s not us, it’s you” attitude.

So, does Snapchat bear some responsibility for “The Snappening”? It’s the kind of question we might expect to go before a judge and jury. But victims of the leak, and their parents, face another obstacle. Like the warning about third-party apps, this obstacle also is buried in the fine print of Snapchat’s terms of use:

Forced arbitration means that Snapchat users, instead of being able to stand up for their rights in court, will have to go before a private arbitrator. It also means that Snapchat chooses the arbitrator, Snapchat decides where the arbitration will take place (Los Angeles County – no matter where the victim happens to live), and Shapchat requires that the proceedings be secret. There is no effective way to appeal. And the victims and their parents can’t band together to bring their legal action; each must take on Snapchat individually.

Given how the deck is stacked, it’s no wonder that one study found that, in consumer disputes, the consumer forced into forced arbitration loses 94 percent of the time.

But there is one thing we can do. If you’re a Snapchat user go to our action page where you can demand that Snapchat stop using forced arbitration. You can demand the same of many other companies with which you’re doing business.

When the time comes to decide, once and for all, if Snapchat has any responsibility for the leaking of 90,000 photos and 9,000 videos, shouldn’t that decision be made by a judge and a jury – not an arbitrator chosen by Snapchat?